Stocks to Sell in July
Stocks finished the second quarter of 2020 on a high note, but the tight grip market volatility has on investors does not want to budge.
In an effort to cope, investors who review their holdings and diminish speculative positions may be far better off down the road.
Take a closer look at your investment portfolio in July to see if you own any of these stocks. Reducing your holdings or removing them altogether may decrease your risk:
-- Chesapeake Energy Corp. (CHK)
-- Macy's (M)
-- Host Hotels & Resorts (HST)
-- Hertz Global Holdings (HTZ)
-- MGM Resorts International (MGM)
[SEE: 8 Rules for Investing In Your 20s You Can't Ignore.]
Chesapeake Energy Corp. (CHK)
The Oklahoma City-based oil and gas exploration and production company has filed for Chapter 11 bankruptcy protection to manage its colossal debt.
Chesapeake has run up debt of more than $9 billion, but the company has reached a deal with creditors to restructure and cut the debt amount by about $7 billion.
The New York Stock Exchange has started the process for delisting the company's common stock and has in effect suspended trading for CHK. You can still find CHK stock on the OTC Pink market, or the over-the-counter market, under the symbol CHKAQ.
As the company grew to become the top natural gas producer in the U.S., its debt grew. The energy company reported a loss of $8.3 billion in the first quarter and suspended quarterly preferred stock dividends in April.
Chesapeake's revenues come from oil, natural gas and natural gas liquids, but demand for these commodities has plunged as a result of the pandemic. Oil prices have remained low, aggravated by the economic shutdown, even going negative in April and diluting Chesapeake's production.
Macy's (M)
Macy's has been struggling for some time, which put it in a weak position when the pandemic hit, making it a high-risk stock to own.
The retail giant has taken steps to close more than 100 stores within the next few years. To gather immediate liquidity, Macy's has laid off managers and furloughed employees.
In the beginning of July, Macy's reported its first-quarter results for 2020, showing net sales of $3 billion, a sales decline of 45% from $5.5 billion year over year, with a diluted loss per share of $11.53. Macy's stock price is down about 61% year to date and the company's future is on shaky ground.
"COVID-19 has significantly impacted our business," Jeff Gennette, chairman and CEO of Macy's, said in a statement. "We are taking action to align our cost base with our anticipated lower sales."
The projected lower sales along with accumulated debt of more than $4 billion may fundamentally change Macy's structure.
"We know that we will be a smaller company for the foreseeable future, and our cost base will continue to reflect that moving forward," Gennette said in a June press release.
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Host Hotels & Resorts (HST)
HST, the largest lodging real estate investment trust, has made swift moves in responding to the reduced business for its hotels with travel and event cutbacks during the pandemic. The company suspended operations in 35 hotels in May, with the remaining 45 hotels operating at reduced capacity to cut operating costs.
Earlier this week, the company amended its $2.5 billion credit agreement, allowing Host to tap into $1.5 billion as long as it maintains a minimum liquidity of $500 million, in an effort to boost its capital position.
In late June, the REIT announced a temporary suspension of its dividends that would have been paid out in July in order to preserve liquidity. This move will increase the company's cash position by about $140 million.
The company said it cannot provide full-year guidance due to the unknown duration of the virus but expects the possibility of "further hotel closures and erosion in operations."
Hertz Global Holdings (HTZ)
Hertz's stock price is at about $1.48, and analysts say it will likely head to $0.
Despite the sharp decline in price, Hertz rallied in June, accompanied by a sharp increase in stock purchases through the online brokerage Robinhood. This has analysts wondering whether markets have underestimated the company's performance after the health crisis.
The rental car company experienced a sudden decline in future bookings and a subsequent fall in revenues, resulting in a bankruptcy filing in May. Last month, the NYSE issued a delisting notice to Hertz. The company is now focused on preserving its capital position and "a path toward a more robust financial structure," according to a news release.
However, Hertz holds a mountain of debt, and since it can't make a stable profit due to the pandemic, the company continues to sit on the stocks-to-sell list.
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MGM Resorts International (MGM)
The company holds long-term debt of more than $11 billion, surpassing its market capitalization of $8 billion, which puts it in a much worse position than its competitors Las Vegas Sands Corp. ( LVS) and Wynn Resorts ( WYNN).
In order to maintain a strong liquidity position, MGM cut its dividend to have a more flexible balance sheet in the first quarter of 2020.
Currently, cash is king for the global entertainment firm. "We continue to implement an extensive number of initiatives to optimize our cash position," Corey Sanders, chief financial officer and treasurer, said in a statement discussing the company's first-quarter results.
MGM's stock price is down more than 45% after beginning 2020 at $33.66.
Concerns over a second wave of the virus could further deepen MGM's financial burden. In response, MGM announced a nationwide mask policy, requiring guests to wear masks at all of MGM Resorts' properties in the United States.
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